Regulation is a critical element of the external setting for new venture projects. Many developers of new projects face an enormous initial work package simply to prepare and maintain a consents pathway to navigate a range of statutory consents and review processes involved. Complex webs of environmental regulation and planning red tape often lead to calls for removing regulation.
However, regulation can positively impact entrepreneurial opportunity and directly lead to new venture creation that introduces new goods, production methods, markets, raw material supplies or organising methods. New ventures are widely considered to be a major determinant of national economic well-being, job creation and GDP growth. Any business that can see the regulatory opportunity will gain a competitive advantage.
Positive regulatory benefit is not limited to regulation such as privatization or major project regulation, but extends to regulation that contains no provisions that deliberately seed or drive such opportunity. The regulatory change actually provides a setting for entrepreneurial opportunity impact and even quite indirect regulatory provisions can incentivate. Risk appears irrelevant to the impact of regulatory change impact upon entrepreneurial opportunity.
Regulatory change directs the allocation of entrepreneurial activity to productive new outcomes, with a cumulative increase in entrepreneurial activity. The new venture opportunity arises from something inherent in the chaotically altered business environment created by the new regulation, rather than specifically from any new mandated entitlements or requirements. It appears to emerge from a legal imperative that forces a wide variety of parties to alter their behaviour, actions and aspirations in a way that strategically alerts parties to optimise new venture opportunity. The new venture that embraces these new regulatory networks stands to benefit.
Entrepreneurial opportunities appear to arise through the increased opportunity, created by new regulation, for negotiation and alliances that create possibilities for new contractual arrangements. The criteria required to achieve the regulatory benefit often bring together people who would not otherwise have come together and, from this, the opportunity for new-means-to-new-ends became reality. The regulatory change places multiple groups of people in relationship whether they like it or not. Whilst this may initially be difficult or even acrimonious, new relationships are forged, or forced, that would not otherwise exist and these appear to create new venture opportunity for exploiting future situations that are now opened up by the regulatory change.
Entrepreneurial opportunity has been shown to take place within clusters that draw on trust and co-operation and include project-related alliances spinning directly from the rights created. These can form into a complex network of diverse alliances between private enterprise, various parts of Governments and third party actors. Alliances obviously require trust. Areas of deep distrust will hinder alliance flows. Any mandatory alliance created by the regulatory change must require that all of its parties are involved in creating the joint value that maximises alliance outcomes. Trust needs to be maintained throughout and at all organisational levels because, once destroyed, it is difficult to rebuild and likely to become self-fulfilling. The new venture or alliance narrative can be powerful in revisiting assumptions and building internal resilience to create and guide a vision for the new venture. A mandated alliance must adequately prescribe the design of the alliance at the outset to address the future management, particularly where it involves partners of unequal size and power. Public-private land ownership partnerships created by regulatory change cannot be structured on the faulty assumption that each partner will have somewhat equal power and resources. Government’s multiple interests and conflicts of interest must be anticipated to influence alliance effectiveness, because Government economic development policy may in the long term diverge from the private economic goals of other parties. Government generally ‘holds all the cards’ and can be expected to adopt a risk adverse approach.
Large organizations, with much at stake commercially, appear better able than smaller parties to familiarize themselves with the terms of any new regulatory change and the methods for optimizing corporate advantage. Powerful corporate and State government interests, even where initially opposed to a particular regulatory change, appear to adjust well to it, turning it to advantage and normalizing it within their corporate systems.
Lawyers play a crucial role in positively influencing the impact of the regulatory change upon entrepreneurial opportunity. They tend to become gatekeepers, even to the point of deciding the timing of negotiations and the terms of the benefit itself, holding back some opportunities and bringing forward others – often according to the demands and economic priorities of the Government. Legal system alliances can be very strong – and powerful in their own right.
Improvements by Regulators
Wherever possible regulatory drafting needs to reduce, and avoid additional, government control. Overwhelmingly, Government and bureaucracy is a dominant negative feature that deflates and demotivates any positive impact upon entrepreneurial opportunity. Regulatory Impact Assessment (RIA) needs to clearly identify the person(s) for whom it is being done. It must cease its negative focus on costs, risks and burdens in order to consider the scope and range of opportunities potentially arising from it, particularly new project/new venture opportunities, with the regulator as facilitator of new venture projects, not the barrier. Regulators need to increasingly build in knowledge stimulants, such as University links, R&D or incubators to yield a better new venture outcome.